New Zealand Q3 CPI Eases Below Forecasts; RBNZ Rate Hike Expectations Hold Firm
| Pair | Now | Since publish |
|---|---|---|
| NZDUSD | — | — |
- NZ Q3 CPI eased to 3.7%, NZD/USD hit one-month high then eased.
- RBNZ hike expected Oct 28; Q4 inflation forecast > 4%, driven by oil.
- NZD/USD near 0.5690, supported by RBNZ bets, subdued USD, oil strength.
New Zealand’s Consumer Price Index (CPI) for the third quarter (Q3) came in softer than expected, with the annual rate easing to 3.7% against a forecast of 3.8% and the Reserve Bank of New Zealand’s (RBNZ) projection of 3.9%. Quarterly inflation also rose less than anticipated at 0.7%, compared to the 0.8% forecast. Following a four-to-five-day winning streak that saw NZD/USD reach its highest since September 23 around 0.5700, the pair trimmed some gains post-release. Despite the slight undershoot, market expectations for an RBNZ rate hike on October 28 remained largely firm, with swaps pricing a near 80% chance of a 25 basis point increase to 3.00%. Analysts noted the miss was insufficient to significantly alter the policy outlook, as elevated oil prices continue to pose an upside risk to inflation in the final quarter, potentially supporting a prolonged tightening cycle.
New Zealand’s Q3 Consumer Price Index (CPI) eased to 3.7% year-over-year, down from 4.1% in the previous quarter and below market forecasts of 3.8%. On a quarterly basis, CPI rose by 0.7%, a slowdown from 1.5% in Q2 and missing expectations of 0.8%. Following the softer inflation data, the New Zealand Dollar (NZD) weakened against major currencies, with NZD/USD trading around 0.5700 and later falling to approximately 0.5679, halting a five-day winning streak. The NZD was notably the weakest against the Japanese Yen among its major peers.
The New Zealand Dollar (NZD/USD) reached a one-month high of 0.5710 before its recovery stalled following the softer CPI data. Analysts note that despite the headline easing, underlying inflation remains persistent, with rising oil prices also supporting further Reserve Bank of New Zealand (RBNZ) tightening. ING forecasts a 25 basis point (bp) RBNZ rate hike on October 28, citing rising oil prices, higher global front-end rates, and NZD weakness, which contribute to risks of Q4 inflation overshooting 4.0%. The RBNZ previously raised rates to 2.75% in September.
The New Zealand Dollar (NZD/USD) reached a new one-month high of 0.5711 before easing to around 0.5686 on Thursday. However, its decline was limited as the US Dollar (USD) remained subdued amid falling US Treasury yields, with the 10-year US Treasury yield slipping below 5.00%. On Friday, the pair gathered strength to trade around 0.5690, supported by growing expectations of a Reserve Bank of New Zealand (RBNZ) rate hike. Beyond previous forecasts, many analysts now anticipate New Zealand’s Q4 inflation to accelerate well above 4% and potentially remain outside the RBNZ’s 1-3% target band. Traders are also monitoring the preliminary reading of the US S&P Global Purchasing Managers Index (PMI) for October later on Friday.
On Friday, the New Zealand Dollar (NZD) posted minor gains against the US Dollar (USD) but remained within Thursday’s trading range, with its bullish momentum fading. This occurred amid a moderate risk-off mood as Oil prices rose to fresh five-month highs. Despite the recent stall, the Kiwi has been noted as one of the strongest performers among major currencies this week, driven by ongoing expectations for a Reserve Bank of New Zealand (RBNZ) rate hike.